Market Update Tsys trading slightly higher, 10Y 3.06%, narrow overnight range on heavy volume in TY futures (510k). The USD index up for a third day, DXY 93.50 the highest since Dec, crude lower (WTI -0.35 @ 70.96), equity futures slightly lower. Tsys rebounded late yest afternoon from steep losses (worst two days since Dec) on Korea summit uncertainty and TIC data showing China’s holdings of tsys actually grew in March to $1.188 trln the highest since last October. In Canada, GOCs are higher in line with tsys, 10Y 2.475 after reaching above 2.505 for the first time since April 2014, while 5s @ 2.30% have eclipsed the highs of 2013, now the most since 2011. Provis steady , all in yields supporting spreads despite heavy supply (~12bln in provi cpn & maturity flow in June). After alberta 48s @ 78.5 yest, rumour of long mani 48 (now 11/10.5 vs Ont). CMB 10Y pricing today ~9:30 in the area of 37bps.
News headlines
Pimco Sees U.S. 10-Year Treasury Yields Topping Out at 3.5% (Bloomberg) U.S. 10-year Treasury yields will move in a 3 percent to 3.5 percent range for the rest of the year as the Federal Reserve continues raising interest rates, said Robert Mead, co-head of Asia-Pacific at Pacific Investment Management Co. “We do think this hiking cycle is quite well advanced,” Sydney-based Mead said at the Bloomberg Invest summit in Sydney. “We also know that the backdrop of the U.S. economy has been pretty strong and going for a long time. At some point we will find these high yields will become an impediment for growth.”
North Korea Threatens to Scrap Trump Meeting on Nuclear Demands (Bloomberg) North Korea threatened to walk away from its meeting with President Donald Trump next month if the U.S. made a “one-sided demand” for the regime to surrender its nuclear weapons. Kim Kye Gwan, a vice foreign minister and a top North Korea disarmament negotiator, said the regime was disappointed by recent comments from the U.S. on their goals for the summit, according to a statement published Wednesday by the state-run Korean Central News Agency. Kim said North Korea felt “repugnance” toward National Security Adviser John Bolton and rejected a “Libya model” in which the regime quickly gives away its nuclear weapons.
Trump to Use Mueller One-Year Mark to Blast Probe, Giuliani Says (Bloomberg) President Donald Trump and his legal team are planning to use the one-year anniversary this week of Robert Mueller’s appointment to ratchet up pressure on the special counsel to close his investigation. Trump and his lawyers are trying to set up the milestone on Thursday as a turning point in their campaign to end Mueller’s probe into Russian election meddling and obstruction of justice, Rudy Giuliani, Trump’s personal lawyer, said Tuesday in an interview. While he isn’t threatening specific actions, Giuliani said they haven’t ruled out additional steps if Mueller doesn’t heed their calls.
Stocks Steady With Treasuries as Dollar Edges Up: Markets Wrap (Bloomberg) U.S. equity futures edged higher and European stocks rose as global markets regained some composure following a risk-off Tuesday session. The dollar extended gains as the euro came under pressure, and Treasury yields stabilized after their spike a day earlier. Contracts for the S&P 500, Nasdaq and Dow Jones fluctuated before moving slightly higher alongside the Stoxx Europe 600 Index. Earlier in Asia, equities nudged downward, with shares in Japan and Hong Kong declining while Australia’s main gauge eked out a gain and Korean stocks were little changed.
Canada home resales fall in April, lowest in over five years: CREA (Reuters) Resales of Canadian homes fell 2.9 percent in April from March to the lowest level in more than five years, the Canadian Real Estate Association said on Tuesday. The industry group said actual sales, not seasonally adjusted, fell 13.9 percent, while the group’s Home Price Index was up 1.5 percent from April 2017. Canada’s once-hot housing market has cooled in recent months in response to rising interest rates and tighter mortgage rules – dubbed a stress-test – since January. While most economists expect a soft landing, some say there is a risk of a U.S.-style crash.
Futures slightly higher ahead of March manufacturing data (Reuters) Canada’s main stock index futures were slightly higher on Wednesday ahead of manufacturing sales data for the month of March. June futures on the S&P TSX index were up 0.1 percent at 7:15 a.m. ET. Canada’s manufacturing sales numbers, which is likely to show a 1.2 percent increase in March, is due to be released at 8:30 a.m. ET. The Toronto Stock Exchange’s S&P/TSX rose 12.20 points, or 0.08 percent, to 16,097.81 on Tuesday. Dow Jones Industrial Average e-mini futures were up 0.05 percent at 7:15 a.m. ET, while S&P 500 e-mini futures rose 0.07 percent and Nasdaq 100 e-mini futures were 0.13 percent higher.
Morneau to provide update today on Trans Mountain expansion talks (BNN) Finance Minister Bill Morneau will update the nation on his effort to save the controversial Trans Mountain expansion project Wednesday morning. A media advisory was sent late Tuesday, stating Morneau will « update Canadians on the ongoing discussions » regarding Kinder Morgan Canada’s controversial $7.4-billion pipeline proposal at 9 a.m. ET in Ottawa.
Trudeau to Trump: NAFTA deal can be done right now, if you want it (BNN) Prime Minister Justin Trudeau has reportedly told President Donald Trump that a NAFTA agreement is imminently within reach as long as some controversial demands are set aside. That high-level conversation occurred in the midst of what many insiders view as a last-ditch push for a renegotiated agreement before impending political events pause the process until next year.
Overnight markets
Overview: US 10yr note futures are up 0.066% at 118-22, S&P 500 futures are down -0.06% at 2707.25, Crude oil futures are down -0.48% at $70.97, Gold futures are down -0.26% at $1287, DXY is up 0.32% at 93.513, CAD/USD is down -0.08% at 0.7772.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.036% | 2 Year | 2.577% |
| 5 Year | 2.303% | 5 Year | 2.914% |
| 10 Year | 2.47% | 10 Year | 3.069% |
| 30 Year | 2.504% | 30 Year | 3.194% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, May 11th -2.7% (-0.4% prior) |
| 8:30 AM | Housing Starts, Apr 1287k est 1310k (1319k prior) |
| Housing Starts MoM, Apr -3.7% est -0.7% (1.9% prior) | |
| Building Permits, Apr 1352k est 1350k (1354k prior) | |
| Building Permits MoM, -1.8% Apr est -2.1% (2.5% prior) | |
| 9:15 AM | Industrial Production MoM, Apr est 0.6% (0.5% prior) |
| Manufacturing (SIC) Production, Apr est 0.5% (0.1% prior) | |
| Capacity Utilization, Apr est 78.4% (78.0% prior) | |
| 10:00 AM | Mortgage Delinquencies, 1Q (5.17% prior) |
| MBA Mortgage Foreclosure, 1Q (1.19% prior) |
Canadian Economic Data
| 8:30 AM | Manufacturing Sales MoM, Mar est 0.9% (1.9% prior) |
Disclosure and Disclaimer
The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.
Ivan Greenstein, Stephan Buu, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230